What is interchange?

Grant @ myposdepot

Visa, MasterCard, and Discover do not issue any credit cards. Rather, they license their payment brands to Issuers and Acquirers. Issuing banks are the entities that provide the consumer, with the credit cards in their pocket. Acquirers are the entities that process the transactions. We are part of the acquiring side. As a registered Independent Sales Organization (ISO) of Visa and MasterCard, we pay them thousands of dollars a year for the privilege of using those brands.

Transaction Process

As shown in the Transaction Process above, Visa, MasterCard, and Discover do not approve transactions. The bank that issued your credit card approves the transaction. The issuing bank takes on the risk that the consumer will pay them back for the items they purchase. In turn, the issuing bank gets paid Interchange-not Visa and MasterCard

The cost of interchange depends on the card type that is presented. A check card, which is tied to your checking account, is a low risk, low cost interchange. If you don’t have money in your checking account, the transaction is declined.

Corporate, government and foreign credit cards are high risk. They have the highest interchange rates. You may ask why. Simply, if someone from a foreign country buys an item here but refuses to pay for it later, perhaps because of a dispute, it is very difficult, sometimes almost impossible to get that money back. Also, people in corporations and government make purchases that are not authorized by higher management. If they quit or are terminated, these entities will often dispute the charges as unauthorized. This makes these three card types high risk.

Grant Rowlands
National Account Executive
P: (866) 480-2433

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Why do credit card processing rates and fees change / differ?

Grant @ myposdepot

growlands@myposdepot.com

Credit card processing fees charged to each individual merchant depend on a few basic variables. To best explain how these rates and fees are determined you must first understand the concept of interchange. Interchange is the rates that each card issuer (Visa, MasterCard & Discover) charge the credit card processor to run each individual sale. Each type of credit card is given an interchange percentage rate and transaction fee and this is always determined by the card issuer. The rates vary because some card types offer incentives, rewards, or some type of promotion to their customer. To make up for this added cost the card issuers charge higher rates to accept these incentive cards.

The card issuer also charges higher rates depending on the risk involved in processing the transaction. For example a merchant who does not physically swipe the card is considered to be processing a less secure transaction because the magnetic strip on the card is not being verified. This is called a CNP or “Card No Present” transaction. These two factors are how the credit card issuing bank determine the interchange rate for each card type. On top of the interchange rate the company who processes your transaction is also going to mark up the rate so they can profit from the transaction.

The markup charged by the card processor can be come in three basic forms or pricing structures.  A flat rate pricing structure is best described as a type of pricing where a single rate and transaction fee are charged no matter what type of transaction the merchant runs. This is the least effective pricing structure because unless the merchant is always processing the same card type, they are being charged rates to cover the cost of the most expensive card types. The flat rate is going to be higher than all interchange rates to assure that the credit card processor covers their cost to process each transaction. This type of pricing is not very popular because the credit card processing industry has so many competitors and it is easy for any individual company to beat.

The interchange markup can also be in the form of tiered pricing. This pricing structure is very common for most retail merchants in the United States. Tiered pricing is based on a set of rates that will be charged to a specific card type. For example four tier pricing has four sets of rates that depending on the type of card the merchant runs will be charged to that specific card type-

TIER 1 – Standard Check / Debit Cards (Cards issued by a bank normally linked to a checking or savings account

TIER 2- Standard Credit Cards – Cards swiped at the point of sale that offering no major incentives to its customers

Tier 3- Manually entered credit cards or cards that offer basic rewards or incentives to its customers

Tier 4- Key entered rewards cards and/or business cards, signature cards, world cards, purchasing cards,  basically this is the majority of your rewards or incentive cards

Each tier has a flat transaction rate and fee that is charged depending on the card type to assure that the card is being charged a higher rate that the interchange rate that the card issuer is charging.

 

The last pricing structure is called interchange plus pricing. As simple as the name is this type of pricing charges the merchant the specific interchange rate that each card is given by the card issuer and a flat markup above the interchange rate which will be profit for the card processor. For example if a Visa Signature card has a rate of 1.6% plus a transaction fee of .10 cents and the merchant is on interchange plus pricing with a markup of .10 percentage or basis points plus a transaction fee of .10 cents the total cost will be 1.7%  plus a transaction fee of .20 cents. This type of pricing is the most cost-effective for the merchant because no matter how many cards they process or what type of cards they are the markup above cost will always be the same. In this case the markup is .10% (basis points) plus .10 cents per transaction. This type of pricing is usually only offered to high volume merchants who have a low average ticket and run a lot of sales for example a restaurant.

Now that you are familiar with the types of pricing and what credit card processing rates and fees consist of here is an overview of the many types of cards that are available to qualified customers:
MasterCard and Visa
Also know as “Bankcards” because a bank issues them. If you look at your credit card, there will be an issue bank on the front or the back of the card (Bank of America, Wells Fargo, Chase, etc.) They are a genuine credit card; the owner is given a credit line and a minimum payment is due every month. This is the most popular forms of borrowing in the US.

Charge Cards
American Express, Discover, JCB and Diners are charge cards; although, in 2007 Amex and Discover are beta testing a “Bankcard”-issuing their cards through a bank. Charge Cards are not issued through a bank but by a financial institution. JCB (Japanese Credit Bureau card) Issued to Japanese businessmen in the US and Japan. The Japanese Central Banking System, in the 1980’s, created this card so all funds will be processed through the Japanese Central Banking System rather than American Banks.

Private Label Cards
A private label card is issued by a retail outlet and contains the name and logo of the retailer (Macy’s, Gap, Shell, Sears, etc.) It is only accepted by the retailer who issued the card. It is usually financed by a bank or card issuing Management Company.

Secured Credit Card
MasterCard or Visa with a set spending limit secured by an equal amount of funds deposited into an account at the issuing bank. This is popular for people with bad credit trying to increase their credit standing.

Pre-Paid Cards
Similar to phone cards where an owner will purchase the card in increments, $5-$100. When the funds are used up the card can be thrown away or “re-loaded”.

Co-Branded Cards
Also know as Rewards Cards where a large corporation partners with a bank. These cards provide an incentive back to the card holder when used. These cards are more expensive for merchants to accept, higher interchange rates, which is how they can offer incentives to use their card.

Debit/Check Card
This is an ATM card with a Visa or MasterCard logo issued by a bank to its clients. It can be used as an ATM Card or otherwise known as “on-line debit” where a PIN number is entered into a pin pad by the card holder. This transaction passes through the debit networks (NYCE, Pulse, STAR, Interlink, etc.) it does not pass through interchange. The merchant is charged a flat fee with “on-line debit”. When the card is used as a credit card with a signature, the transaction goes through interchange and is called an “off-line debit”. NOTE: A pin pad is needed to accept debit transactions. If a customer has a pin pad they are using from another Merchant Acquirer, it will need to be “swapped out” for a pin pad with an Alpha Card encryption

EBT (Electronic Benefits Transfer)
This is a government issued card which was originally designed to replace food stamps. All federal benefits are now being paid by EBT. If a merchant is set up to accept EBT, they are issued a Financial Credit Services number (FCS ID). This number must be entered into the “Terminal Account Set up Form” in order for the merchant to process via EBT. A pin pad with a Buypass encryption must be used by merchant to accept EBT.

Contactless Cards
New technology that used Radio Frequency Identification (RFID) and allows consumers to pay for purchases by “waving” their card in front of the POS device equipped with the contactless reader.

If you have any questions or would like more information about myposdepot products or services please contact

Grant Rowlands

(866) 480-2433

growlands@myposdepot.com

 

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Tags: American Express, bundled merchant account, commercial cards, competitive edge, credit, credit card acceptance, Credit Card Processing, Credit Cards, Discover, EBT, EBT state and government cards. Customers happier, gift cards, Increase check-out speed, interchange pricing, MasterCard, merchant account services, merchant processing, merchant services, myposdepot, pci compliance, rates and fees, tiered pricing, Visa

Grant Rowlands
National Account Executive
P: (866) 480-2433
C: (215) 421-3333
F: (215) 494-0368

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Industry specific credit card processing solutions allow merchants to save on their overall cost by reducing fees.

GRANT @ MYPOSDEPOT.COM

MyPOSDepot is a bank direct payment processor. There’s no middleman to contend with. When you get your payment processing directly from the source you save!

MyPOS Depot guarantees the lowest credit card processing rates in the industry. They are so confident that they can beat the rates of any competitor that they will write you a check for $500.00 if they cannot. Just provide statements or a quote from your current or prospective service provider & MyPOS Depot will conduct a FREE cost analysis to show you the savings!

Questions?

Contact MyPOS Depot’s Sales Department @ (866) 480-2433

Campus Solutions

Plan for the future by offering a variety of payment options today. Educating tomorrow’s future leaders is great responsibility. That’s why MyPOS Depot offers solutions to foster an environment that allows students to focus solely on learning, not on the complexity of tuition payments. Our state-of-the-art services and products will make your payment system more cost-effective and offer more options to help students feel at ease.

Childcare Solutions

Eliminate complicated payment with MyPOS Depot’s cost-effective solutions. Let us streamline your payment management system so you can focus on what you do best: keeping children safe and parents happy.

Food Service Solutions

Create a feast for your bank account as well as your senses. MyPOS Depot offers fresh ideas to keep your business running smoothly and efficiently, while saving you money with every transaction. Let us handle the details so you can focus on growing your passion.

Gas and Small Market Solutions

Get your customers to their destination even faster. MyPOS Depot provides the technology that allows your customers to refuel, pay, and on their way faster than ever. In addition, MyPOS Depot offers full ATM full service to provide incentive for people to visit your store on a continual basis. Busy customers appreciate all that you offer to help them out and will return the favor by patronizing your establishment.

Healthcare Solutions

Healing people is one of the most important services one can provide, and MyPOS Depot can help you minimize the stress of payment so you can focus on what really matters. We offer solutions to process a variety of payment so there’s always an option for everyone. Let us take care of payment processing so you can provide the best care for your patients.

 

Hospitality and Lodging Solutions

Get 100% guest-satisfaction every step of the way, from check-in to check-out. Every guest deserves the best possible service, and by utilizing MyPOS Depot’s wide range of services you’ll be able to provide an experience they’ll never forget. Once you try our credit card payment options or utilize our full ATM service, you’ll wonder how you ever worked efficiently without us. Hospitality is all about pleasing the guest – it’s time someone was all about pleasing you.

Laundry and Cleaning Solutions

It’s like finding $20 in your jeans pocket. . .only it happens every day. Let MyPOS Depot guide your establishment into the 21st century with our convenient cashless solutions. Customers will always have the right amount of change, and minimizing the cash at your business decreases your vulnerability to theft.

Pharmacy Solutions

Get the Rx for savvy payment processing. With MyPOS Depot you’ll not onhy not increase your company’s efficiency, but also improve customer service. Get your customers the medicine they need in the most cost-effective and competent way possible, and we’ll stand behind you 100%.

Neighborhood Market Solutions

Make your customers even happier to see you by offering a convenient array of payment options. MyPOS Depot offers a wide variety of payment options, as well as full ATM full service that includes ATM transaction processing, ATM sales, leasing, deployment, vault cash services, installation, monitoring, service and support under one roof. We’ll take care of the payment so you can focus on keeping your customers happy.

Non-Profit Solutions

You help people, so let us take care of you. At MyPOS Depot we provide payment solutions that maximize company efficiency to allow people to focus on their passion. Our services and products will help you raise more money to aid even more people, making the world a more caring place for everyone.

Parking Solutions

Get your business up to speed with cashless convenience. It’s a busy world out there – let MyPOS help you become even more competitive with our convenient payment processing systems. By adding a cashless form of payment to your current options you’ll get people on their way in less time than ever before!

Personal Care / Wellness Solutions

Eliminate the stress of searching for a suitable payment processing system. Your customers come to you to relax, so let MyPOS Depot take care of the details of payment so you can provide a calm, stress-free environment. Your guests will feel even better if they know how well you’re taking care of them.

Professional Services Solutions

Make your services even more valuable by offering a variety of payment options. Regardless of your profession, your clients will appreciate a variety of payment options. MyPOS Depot also offers electronic check conversion so you’ll have access to payments by check without ever stepping foot inside a bank. Make your business even more competitive and stay ahead of the curve with our state-of-the-art technology.

Restaurant Solutions

Taste success with every transaction! Offering a variety of payment options encourages repeat business and provides four-star service to guests. MyPOS allows you to accept all types of credit and debit cards, eliminates the middleman in processing payment, and allows you to reap the profits of an efficient payment system that puts your guests’ needs first.

Retail Solutions

There’s a lot of product turnover in retail, but our quality and competency never changes. MyPOS Depot can enhance your passion for quality and great customer service by by offering a variety of payment options. Not only that, but our electronic check converter transfers funds for a purchase directly into your account, so you never have to set foot in a bank.

Service and Repair Solutions

Hit the nail on the head with the perfect payment option for your customers. They trust you for the best possible service, so give them a little something extra with convenient payment processing.

Utility Solutions

Feel the energy with every transaction! Getting your customers to pay their bills on time is a time-consuming and costly problem for utility companies. However, by using MyPOS Depot’s check reader you’ll be able to deposit check funds without a trip to the bank, and equip your gas and oil delivery staff with wireless terminals to collect payment immediately after delivery.

Vending Solutions

Your customers will have exact change, every time. By offering a cashless payment option you’ll make purchasing more convenient for people, increasing your sales. In addition, MyPOS Depot offers full ATM full service that includes ATM transaction processing, ATM sales, leasing, deployment, vault cash services, installation, monitoring, service and support under one roof. Soon people will have even more incentive to buy their favorite snack from you.

Veterinary Solutions

Be the top dog when presenting payment options. Whether you’re traveling to your four-legged patients or they’re coming to you, an efficient payment processing system ensures that you’re providing the best possible care. MyPOS Depot has the right tools for you that will easily integrate into your current management system to make it more cost-effective. If your patients could talk, they would thank you!

Wholesale Solutions

We streamline your business so you can provide products at an economical price. In order to give customers the best possible value, your business needs to be as cost-effective as possible. Let MyPOS Depot centralize your payment processing system so you can maximize profits while offering solid deals to your customers that keep them coming back.

 

Credit Card Processing

Look no further for a fast, profitable and safe solution to your customer payment needs. By giving your customers the option of paying via credit card, you will encourage higher customer sales, decrease checkout times, and bolster customer revisits. In addition, accepting credit cards reduces the amount of cash on hand, decreasing your vulnerability to theft.

Merchant Cash Advance

Cash advances provide you with an advance on your future credit card sales without restrictions on how to use the money. We can get you the money you need within seven days, and do not require collateral or personal guarantees. Our flexible capital spending funding and easy to meet requirements will help your business succeed!

Electronic Check Acceptance

Eliminate weekly bank trips with our free check reader, which electronically captures information from a check so the funds are deposited directly into your account. As an additional benefit, you will never have to deal with non-sufficient funds again with our check guarantee program.

ATM Services

Add value to your business and increase foot traffic with an on-site ATM. Surcharge fees offset credit card terminal charges and people will buy more with the cash they just withdrew. Give your customers even more reasons to patronize your business!

Interchange, what it is and what it is not?

 

Grant Rowlands @ myposdepot.com

Everyone is talking about Interchange, but most people do not define it properly.

Some merchants believe that the rates or transaction fees they pay are Interchange, they are not. There are three components that make up the fees that merchants pay. The processor that runs the transaction charges the merchant for each transaction.

Interchange is the portion that goes to the bank that issued the credit or debit card (if debit card with PIN number used, there are additional fees depending on the network used).

A small percentage of every sale goes to the brand of the card (MC, Visa, Discover), these fees are called the Dues & Assessments fees. Currently the rate is 0.11% plus about two cents per transaction.

The rest is retained by the processor. The processor’s share funds its computer network, customer service, support staff, pay of agent signing merchant and the processor’s profit.

There are over 500 different levels of Interchange. Volume plays a part in Interchange level, the largest retailers pay lower rates than smaller stores for the same card types.

Some businesses (including big box stores) are on Interchange Plus pricing. The Visa debit Interchange is 0.95% + $0.20 per transaction. A $100 transaction will have an Interchange cost of $1.15. If the merchant pays Interchange Plus $0.05, then total with Dues & Assessments (D&A) would be about $1.33.

Most merchants pay tiered rates. If that rate is 1.79% + $0.25, then the $100 transaction costs the small merchant $2.04 or $2.17 if D&A not included in rate.

Consider Interchange to simply be part of your processors wholesale cost. If you are a large retailer, your overall rate is tied directly to Interchange. If a smaller merchant, Interchange has no direct bearing on your rate.

If your statement includes the term(s) of Qualified, Mid-Qualified, Non-Qualified, MQ or NQ; you have tiered pricing, like about 90% of other merchants.

MyPOSDepot

@MyPOSDepot Philadelphia, Pa

MyPOSDepot is a bank direct payment processor. There’s no middleman to contend with. When you get your payment processing directly from the source you save!